Oil Closes up at $74.15, Hovering Near Record

Reuters

Monday, 16 Jul 2007 | 5:09 PM ETReuters

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U.S. light, sweet crude gained 22 cents to close at $74.15 a barrel Monday.

But London Brent, seen as the best indication of global oil prices, settled down 24 cents to $77.33 a barrel after having risen to a peak of $78.40 earlier in the day, just shy of the record $78.65 struck Aug. 8, 2006.

"Brent is down more on profit-taking than anything else, since that market has risen so sharply. People are reacting to that, rethinking their positions," said Nauman Barakat, senior vice president at Macquarie Futures USA.

The market was also pressured by a 9.86-cent slump in U.S. gasoline futures to $2.1262 a gallon, as oil refineries in the United States restarted key processing units.

"Gasoline is down basically because there is expectation that growing supplies are sufficient to meet demand and that refineries will continue to produce near or at record levels," said Phil Flynn, analyst at Alaron Trading in Chicago.

Energy analysts expect that U.S. gasoline supplies rose last week by 900,000 barrels, the third consecutive weekly build, according to a Reuters poll. The U.S. government will release its next snapshot of petroleum stockpiles in the world's biggest energy consumer Wednesday.

Seasonal maintenance and unanticipated outages on North Sea oil fields had fueled a near three-week rally, lifting Brent by more than $7 since late June.

Speculative investors aided the rally by pushing cash into the commodity amid concerns world demand growth would continue to stretch production capacity.

Speculators in the New York Mercantile Exchange crude oil market boosted net long positions to a record high in the week ending July 10, the Commodity Futures Trading Commission (CFTC) reported Friday.

"As long as the large speculative funds can continue to finance the same supportive action as in the last 10 days, it is hard to see a stop of the upward move," said Olivier Jakob of Petromatrix.

Goldman Sachs said in a Monday research note that oil prices could reach $90 a barrel this autumn and $95 a barrel by the end of the year, if the Organization of the Petroleum Exporting Countries does not ease production cuts that have helped tighten global markets.

But OPEC says world oil demand next year will grow moderately while supply from rival producers will expand, reducing the need for crude from the producer group.